Iraq's judiciary will resume its activities on Wednesday after powerful Shi'ite cleric Moqtada al-Sadr called on his supporters to withdraw from outside its headquarters, the state news agency INA reported.

The Supreme Judicial Council earlier on Tuesday suspended its work after Sadr supporters camped out near its headquarters to demand that it dissolve parliament, escalating one of the worst political crises since the U.S.-led invasion in 2003.

"In light of the withdrawal of the demonstrators and the lifting of the siege on the headquarters of the Supreme Judicial Council and the Federal Supreme Court, it was decided to resume work normally in all courts as of tomorrow morning," the council said.

The populist leader Sadr has helped inflame tensions in Iraq in recent weeks by commanding thousands of followers to storm and occupy parliament, preventing the formation of a government nearly 10 months after elections.

However, he called on his supporters on Tuesday to withdraw from the vicinity of the judiciary authority and to keep only the protest tents and banners outside the building.

In a statement, he also urged the protesters to continue their sit-in outside the parliament.

The judiciary condemned the gathering of protesters outside its headquarters as "unconstitutional behaviour", adding that protesters had sent threats by phone.

Prime Minister Mustafa al-Kadhimi, who cut short a trip to Egypt to deal with the crisis, urged all sides to calm down and renewed calls for a national dialogue.

In a statement, Kadhimi said disrupting the judiciary "exposes the country to serious risks".

The standoff in Iraq is the longest stretch without a fully functioning government in the nearly two decades since Saddam Hussein was overthrown in a U.S.-led invasion in 2003.

Sadr was the biggest winner of the 2021 election but was unable to form a government with Kurdish and Sunni Muslim Arab parties, excluding his Iran-backed Shi'ite rivals.

The young cleric, who has unmatched influence in Iraq, can quickly mobilise hundreds of thousands of followers to stage demonstrations and paralyse the country's byzantine politics.

Sadr has called for early elections and unspecified changes to the constitution after withdrawing his lawmakers from parliament in June.

"The people are demanding the parliament to be dissolved and the immediate formation of an interim government," said a protester draped in an Iraqi flag.

"Help us. Stand with us. Don't be afraid of anyone," said another demonstrator.

Sadr's political opponents, mostly fellow Shi'ites backed by Iran, have refused to accede to his demands, raising fears of fresh unrest and violence in a conflict-weary Iraq.

He survived upheaval in the 19 years since his Mehdi Army militia took on the Americans with assault rifles and rocket-propelled grenades in the streets and alleys of Baghdad and southern cities.

His followers also fought the Iraqi army, Islamic State militants and rival Shi'ite militias.

Most of Iraq's Shi'ite political establishment remains suspicious or even hostile to Sadr. Still, his political organisation, the Sadrist movement, has come to dominate the apparatus of the Iraqi state since the 2018 election, taking senior jobs within the interior, defence and communications ministries.